Board/Executive Gender Diversity and Firm Financial Performance in Canada: The Mediating Role of Environmental, Social, and Governance (ESG) Orientation

Abstract

The objective of this study is to verify the effect of gender diversity on the board of directors (BD) and the executive committee (EC) of participating Canadian firms with regard to the financial performance and the mediating role of environmental, social, and governance (ESG) orientation in this relationship. The study sample was composed of 133 Canadian firms, and the data cover an 18 year timeline (2002–2019), with 925 observations. This paper provides empirical support for the effect that gender diversity in turnover has on the financial performance of firms and explains 53% of its variance. In addition to supporting the beneficial effect of gender diversity on performance, the study reveals the mediating mechanism through the ESG orientation of companies explaining almost 4% of the total effect of gender diversity on performance. By analyzing two levels of diversity, the study revealed the superiority of the effect of gender diversity in BDs as compared to ECs. We discuss the theoretical and empirical implications of the results found, as well as the limitations and future prospects of research on the subject.

Board gender diversity and sustainability performance: Nordic evidence

“…We used board gender diversity and sustainability performance data from the Thomson Reuters ASSET4 database. Prior studies extensively used the ASSET4 database (Burkhardt et al, 2020; Galletta et al, 2022; Orazalin & Baydauletov, 2020; Ouni et al, 2020), Bloomberg database (Cucari et al, 2018; Manita et al, 2018), Systainalytics database (Lu & Herremans, 2019; Naciti, 2019), among others for ESG or sustainability measures. The database maps, analyzes, and verifies firms' public ESG disclosure such as corporate reports, websites, press releases, social media, etc.…”

“…Similarly, the upper echelons theory is used in several studies related to gender diversity and firm performance (Li et al, 2017; Nadeem et al, 2020; Ouni et al, 2020). According to the theory, TMT or leadership affects corporate performance through their interpretation of situations, a product of personal values, personality traits, and experiences (Ouni et al, 2020).…”

ESG Disclosure in an Emerging Market: An Empirical Analysis of the Influence of Board Characteristics and Ownership Structure

“…Recently, some studies have expanded the scope and impact of diversity beyond the board to senior management. For instance, Ouni et al [53] find empirical support for the beneficial effect of gender diversity at the board and senior management levels in financial, social, and environmental terms among Canadian firms.…”

Sustainable Energy Efficient Human-Centered Digital Solutions for ESG Megacities Development

“…In Canada, ESG performance has also been shown to mitigate the relationship between gender diversity (corporate scandals) and firm financial success (Ouni et al, 2020). Higher ESG performance increases a company's market value, whereas worse ESG performance decreases it (Chouaibi et al, 2021).…”

“…Human-centered digital solutions help financial institutions, governments, and businesses of all sizes (Ouni et al, 2020). Incorporating social entrepreneurship reduces corporate risk perceptions, which might have a negative impact on energy efficiency (Aisaiti et al, 2019).…”